Institutional Crypto Custody in Switzerland: Sygnum, Copper, and the FINMA-Regulated Landscape

Before the collapse of FTX in November 2022, institutional digital asset custody was frequently treated as a secondary consideration — an operational function that mattered less than execution quality or yield opportunities. After FTX, custody became the primary institutional concern. Billions of dollars in client assets that were “on exchange” — recorded as client balances in FTX’s internal ledger — were revealed to be nothing of the sort. They had been commingled with FTX’s own funds, used for proprietary trading and loans to affiliated entities, and were irrecoverable when the firm became insolvent.

The FTX catastrophe forced every institutional digital asset participant to confront a foundational question: who actually holds your assets? What legal protections apply? What happens to your digital assets if your custodian fails?

In Switzerland, these questions have precise, legally robust answers. The Swiss custody framework — combining FINMA-licensed custodians, the DLT Act’s specific insolvency protections, and the annual audit regime that validates client asset segregation — provides institutional-grade custody certainty that few jurisdictions can match.

Why Custody Matters: The Legal Foundation

Custody of digital assets is fundamentally different from custody of traditional securities, and that difference creates specific risks that must be understood before selecting a custodian.

Traditional securities are held in dematerialised form through central securities depositories (CSDs) — in Switzerland, SIX SIS AG. When a Swiss bank holds equities for a client, the client’s ownership is recorded in the CSD, and the bank’s claim on those securities is traceable through a chain of legal title that sits entirely outside the bank’s balance sheet. If the bank fails, the securities are returned to the client via the CSD infrastructure, not claimed by the bank’s creditors.

Digital assets operate on blockchains — distributed ledgers without a central depository. Ownership of Bitcoin or Ethereum is determined by who controls the private key that can authorise transactions from the address holding the asset. If a custodian holds your Bitcoin private keys and that custodian fails, the question is entirely legal: are those Bitcoin in your name (protected client property) or are they recorded as the custodian’s property on the blockchain (general creditor claim in bankruptcy)?

The answer in Switzerland is legally clear. The DLT Act of 2021 amended Swiss insolvency law to ensure that digital assets held in segregated custody — properly identified as client assets in the custodian’s records — are protected property that must be returned to the client in the event of the custodian’s insolvency. They are not part of the bankrupt estate. This is the Swiss law equivalent of the CSD protection that exists for traditional securities.

Custodian Categories in Switzerland

Switzerland’s digital asset custody ecosystem can be organised into three categories:

FINMA-Licensed Banks Providing Custody

Sygnum Bank AG is Switzerland’s leading digital asset custody bank, having been granted a Swiss banking licence in 2019 as one of only two digital asset banks globally at the time. Sygnum’s custody offering operates under the full Swiss banking regulatory framework — client assets are segregated, annually audited by a FINMA-recognised audit firm, and protected under the DLT Act insolvency provisions.

Sygnum uses a combination of MPC-based custody technology and institutional-grade cold storage for the bulk of client digital asset holdings. Its custody offering covers Bitcoin, Ethereum, and a range of major tokens, with specific custody arrangements for staked assets (ETH validators) and tokenised securities issued on the SDX platform.

AMINA Bank AG (formerly SEBA Bank), also founded in 2019 with a concurrent Swiss banking licence, provides equivalent custody services with an additional focus on serving institutional clients in the Middle East and Asia through its Abu Dhabi office. AMINA’s custody model mirrors Sygnum’s in regulatory structure — banking licence, annual audit, DLT Act protections — with its own technical custody implementation.

Both Sygnum and AMINA provide custody-adjacent services including staking-as-a-service, securities lending, and prime brokerage that leverage the custody relationship as the operational foundation.

Non-Bank Custodians with Swiss Presence

Copper.co is a London-headquartered institutional custody and prime brokerage provider with a significant Zug-based presence. Copper is not a FINMA-licensed bank — it operates under UK financial services regulation — but it serves Swiss institutional clients through its ClearLoop technology, which provides custody-anchored trading across multiple digital asset venues without requiring on-chain settlement for every trade.

Copper’s custody uses MPC (multi-party computation) key management, distributing cryptographic key shares across multiple secure facilities with no single point of compromise. Its institutional client base includes hedge funds, family offices, and asset managers who value Copper’s technology infrastructure and multi-venue connectivity over the explicit Swiss regulatory framework.

The distinction between Copper and the Swiss bank custodians is important for institutional due diligence: Copper provides technically sophisticated custody with strong operational security, but it does not provide the Swiss banking law and DLT Act insolvency protections that characterise Sygnum and AMINA custody. UK regulatory protections apply instead.

SIX Group and SDX Settlement Infrastructure

SIX Digital Exchange (SDX) operates at the settlement infrastructure layer for tokenised digital securities rather than as a custodian for Bitcoin or Ethereum. SDX holds the DLT trading facility and DLT central securities depository licences from FINMA — the regulatory authorisations specifically created by the DLT Act for digital securities market infrastructure.

For institutional participants in the Swiss tokenised securities market — buying and selling digital bonds, tokenised equities, and other DLT securities issued on SDX — SDX’s settlement infrastructure provides the CSD-equivalent function that SIX SIS provides for traditional securities. Holdings of DLT securities on SDX are protected by the same regulatory framework as traditional securities holdings.

SDX custody and settlement is separate from and complementary to Bitcoin/Ethereum custody at Sygnum or AMINA. Institutional portfolios that combine traditional digital assets (BTC, ETH) with tokenised securities will have custody relationships across both layers.

Technical Custody Models

The technical architecture of digital asset custody determines the operational security of key management — the process by which private keys are protected, accessed for transaction signing, and guarded against both external attack and internal fraud.

Hot Wallet vs. Cold Wallet vs. Warm Wallet

The first dimension of custody architecture is the connectivity of the key management infrastructure:

Hot wallets hold keys on internet-connected systems, enabling instant transaction signing and settlement. Hot wallets are operationally efficient — they support high-frequency settlement without human intervention — but they are the most exposed to online attack vectors. Custodians maintain hot wallets to hold the operational float needed for same-day settlement, keeping the balance as small as consistent with operational requirements.

Cold wallets store private keys in systems that have never been connected to the internet — typically hardware wallets, hardware security modules in air-gapped facilities, or paper backups stored in physical vaults. Cold storage provides the highest level of key security because there is no internet-accessible attack surface. The tradeoff is operational: initiating a transaction from cold storage requires manual processes that may take hours to days. Cold storage is appropriate for long-term institutional holdings.

Warm wallets occupy the middle ground — keys stored on hardened, restricted-access systems that can be accessed for settlement but are not directly internet-exposed. Warm wallet infrastructure supports faster settlement than cold storage (typically hours rather than days) while providing stronger security than hot wallets.

Professional institutional custodians maintain all three tiers, allocating holdings across them based on expected settlement frequency. Industry practice for large custodians: 95%+ in cold/warm storage, with hot wallet float capped at the volume needed for daily settlement operations.

MPC Custody

Multi-party computation (MPC) custody is the dominant technology for institutional digital asset key management. In an MPC scheme, the private key controlling digital assets is never reconstructed in full — instead, cryptographic key shares are distributed across multiple parties, devices, or geographic locations. Any transaction requires a threshold number of shares (e.g., 3-of-5) to participate in a distributed signing protocol that produces a valid transaction signature without ever assembling the complete key.

The security advantages are significant: there is no single device, server, or person who possesses the complete key. Compromise of one key share reveals nothing about the others. A coordinated attack against multiple geographically distributed key share custodians is vastly more difficult than attacking a single key holder.

Copper, Fireblocks (widely used by Swiss banks as custody infrastructure), and several other institutional providers use MPC as the core custody architecture. MPC is compatible with both hot and cold wallet operations — key shares can be stored on internet-connected servers (for hot/warm operation) or on air-gapped HSMs (for cold operation).

Hardware Security Module (HSM) Custody

HSMs are purpose-built tamper-resistant hardware devices that generate, store, and use private keys internally without ever exposing the key material externally. Signing operations happen inside the HSM — the key never leaves the device. HSMs are certified to security standards (FIPS 140-2 Level 3 or higher for institutional use) and are physically tamper-evident, typically triggering key erasure if tampered with.

HSM-based custody is the gold standard for financial cryptography and is used in payment card systems, interbank settlement, and PKI infrastructure. For digital asset custody, HSMs stored in distributed, access-controlled vaults provide a physically robust cold storage solution.

Some Swiss custodians combine HSM infrastructure with MPC key management — for example, distributing HSM-stored key shares across geographically separate data centres.

Multi-Signature Custody

Multi-signature (multi-sig) custody uses a blockchain-level feature that requires multiple independent private key signatures to authorise any outgoing transaction. A 3-of-5 multi-sig arrangement means five key holders exist, and any three must sign a transaction for it to be valid on the blockchain.

Multi-sig has the advantage of transparency — the requirement is encoded directly in the blockchain address, verifiable by anyone. It is also native to Bitcoin and Ethereum at the protocol level, without requiring additional cryptographic infrastructure beyond standard key management.

The operational limitation is coordination latency: three independent signers must review and sign every transaction. For institutional clients with complex trading operations and high settlement frequency, multi-sig coordination overhead is a practical disadvantage compared to MPC, which can achieve the same security benefits with lower operational friction.

FINMA’s Treatment of Crypto Under the Banking Act

For FINMA-licensed banks providing crypto custody, the Swiss Banking Act applies the same segregation requirements to digital assets as to traditional financial instruments. Client assets must be:

• Individually identifiable as belonging to specific clients (segregated accounts, not pooled holdings)
• Excluded from the bank’s own balance sheet
• Not pledged, lent, or hypothecated without explicit client consent
• Verified through annual regulatory audit

FINMA’s 2019 guidance and subsequent supplements addressed digital asset custody specifically, clarifying that digital assets (whether payment tokens like Bitcoin or investment tokens classified as securities) held in segregated custody for clients are subject to the same segregation requirements as traditional securities under the Banking Act.

The DLT Act’s 2021 amendments added an additional specific layer: digital assets held in a DLT-based registry right (Registerwertrecht) or in identified segregated custody accounts are explicitly excluded from the custodian’s bankruptcy estate under Swiss insolvency law. This protection eliminates the ambiguity that existed before 2021 about whether digital assets in bankruptcy would be treated as identified client property or general assets.

Swiss Insurance for Custody

Institutional digital asset custodians in Switzerland typically maintain insurance coverage addressing two primary risk categories:

Crime insurance: Coverage for losses resulting from theft, hacking, unauthorised access, or fraudulent employee action. Crime insurance policies for digital asset custodians have become a specialised insurance product, with underwriters including Lloyd’s of London syndicates and specialist cyber insurers. Coverage limits vary significantly — typical institutional crime insurance for digital asset custodians ranges from $25 million to $500 million, depending on the custodian’s total assets under custody and premium capacity.

Civil liability insurance: Coverage for losses resulting from operational errors, negligence, or system failures that cause client asset losses. Civil liability insurance complements crime insurance by covering error-based losses rather than criminal or external-attack losses.

The existence and adequacy of insurance coverage is a standard institutional due diligence item when selecting a crypto custodian. Institutional clients should request evidence of current insurance coverage, including policy limits, exclusions, and the financial strength rating of the insurer.

Swiss banking regulations do not prescribe specific insurance coverage requirements for crypto custodians, but FINMA’s general operational risk requirements — which require banks to identify and mitigate major operational risks — effectively require custodians to have appropriate coverage for key custody risks.

Settlement Finality Under the DLT Act

The DLT Act’s concept of Registerwertrecht (ledger-based securities) provides legally certain settlement finality for tokenised financial instruments. When a DLT security transfer is recorded on an approved DLT system — such as SDX’s infrastructure — that transfer has the same legal finality as a traditional securities transfer through SIX SIS. The transfer is irrevocable once recorded.

For pure digital assets (Bitcoin, Ethereum) rather than DLT securities, finality is achieved through blockchain confirmation. Bitcoin transactions are considered practically final after six confirmations (approximately 60 minutes). Ethereum transactions achieve finality within minutes under proof-of-stake consensus. The DLT Act’s direct provision of settlement finality applies specifically to tokenised securities rather than native digital assets, but the broader legal framework — FINMA oversight, banking law segregation, DLT Act insolvency protections — provides a comparable certainty framework for BTC and ETH custody at licensed Swiss banks.

Custody Costs

Institutional crypto custody at Swiss FINMA-licensed custodians is priced on an asset-under-custody basis:

Typical range: 0.10–0.30% per annum of assets under custody

A custody fee of 0.20% on CHF 10 million in digital assets translates to CHF 20,000 per year — a cost that must be evaluated against the legal certainty, regulatory standing, and security infrastructure provided.

Custody fees vary by custodian, asset volume (fee rates decline at higher AUC), asset type (native digital assets vs. tokenised securities), and ancillary services included. Clients also bear transaction fees for settlement operations — the cost of on-chain transactions initiating or receiving digital asset transfers.

For institutional clients, custody cost is rarely the primary selection criterion. The regulatory standing, asset protection framework, and operational track record of the custodian carry far more weight in the institutional due diligence process.

How Institutional Clients Choose Custodians

Post-FTX, the institutional custodian selection framework has converged around several key criteria:

Regulatory standing: Is the custodian directly supervised by a major financial regulator? For Switzerland, the critical question is whether the custodian holds a FINMA banking or securities dealer licence.

Legal asset protection: Are client assets legally segregated under applicable insolvency law? For Swiss custodians, the DLT Act and Banking Act provide this protection explicitly. For non-Swiss custodians, the applicable legal framework should be specifically verified.

Proof of reserves and audit verification: Does an independent, qualified audit firm verify client asset segregation and reserve adequacy? FINMA-licensed custodians are subject to annual audits by FINMA-recognised audit firms that specifically verify custody integrity.

Technical custody architecture: What key management technology is used? Is the architecture designed to eliminate single points of failure?

Operational track record: Has the custodian operated without major incidents? Has it maintained operations through market stress events?

Insurance coverage: What is the extent and limit of crime and civil liability insurance?

Service breadth: Does the custodian provide complementary services — staking, lending, OTC execution — that create operational efficiency for the institutional client?

Switzerland’s FINMA-regulated custodians — Sygnum and AMINA principally — answer these questions most comprehensively among European options. For institutional clients with Swiss regulatory requirements or strong preferences for European legal frameworks, they represent the current standard of institutional-grade crypto custody.

Related Coverage

• Crypto Prime Brokerage in Switzerland: Custody, Leverage, and Institutional Services
• Institutional OTC Trading in Switzerland: Desks, Settlement, and Prime Brokerage
• FINMA Securities Dealer Licence: Requirements and Digital Asset Applications
• Bitcoin and Ethereum ETPs in Switzerland: SIX Exchange, 21Shares, and the Institutional Investment Case
• Rulematch: Zurich’s Regulated Digital Asset Trading Infrastructure for Banks

Frequently Asked Questions

Are digital assets held at a Swiss bank protected if the bank fails?

Yes. Under the DLT Act and the Swiss Banking Act, digital assets held in segregated custody accounts at a FINMA-licensed bank are protected client property that must be returned to the client in the event of the bank’s insolvency. They do not form part of the bankruptcy estate. This protection is verified through annual audits by FINMA-recognised audit firms and is legally enforceable under Swiss insolvency law.

What is the difference between MPC custody and multi-signature custody?

Both achieve the security objective of requiring multiple independent approvals for transactions, but through different mechanisms. Multi-signature uses a blockchain-level feature where multiple complete private keys must sign — visible on-chain, simple, but operationally slow. MPC distributes cryptographic key shares that are never assembled into a complete key, with the distributed signing protocol producing a valid signature — more operationally efficient for high-frequency settlement but requires specific cryptographic infrastructure. Both are legitimate institutional custody approaches; MPC has become the dominant institutional standard.

How do custody fees compare between Switzerland and other jurisdictions?

Swiss institutional custody fees (0.10–0.30% per annum) are broadly comparable to institutional custody fees for digital assets in other major financial centres. The higher cost relative to some offshore, unregulated custody services reflects the regulatory compliance costs, annual audit obligations, insurance premiums, and capital requirements of FINMA-licensed custodians. Institutional clients typically view the cost premium as justified by the regulatory certainty and legal asset protection it provides.

What is the SDX custody infrastructure and how does it relate to Bitcoin custody?

SIX Digital Exchange (SDX) provides custody and settlement infrastructure specifically for DLT securities — tokenised bonds, equities, and fund units issued on the SDX blockchain. SDX is not a custodian for Bitcoin or Ethereum as native digital assets. Institutions holding both native digital assets (BTC, ETH) and tokenised securities will typically have separate custody arrangements: a bank custodian (Sygnum, AMINA) for native digital assets, and SDX’s settlement infrastructure for DLT securities.

Does Switzerland have depositor protection for digital assets held at digital asset banks?

The Swiss depositor protection scheme (esisuisse) protects deposits up to CHF 100,000 at Swiss banks — but this scheme is designed for fiat currency deposits, not digital asset holdings. Digital assets held in segregated custody at Sygnum or AMINA are protected by the DLT Act’s specific insolvency provisions rather than esisuisse. These protections are arguably stronger than deposit insurance for this purpose, because the segregated assets are legally excluded from the bankruptcy estate entirely rather than being subject to a capped recovery claim.

Donovan Vanderbilt is the founder of The Vanderbilt Portfolio AG, Zurich. ZUG TRADING does not provide investment advice. This article is for informational purposes only.